LIVE MARKETS-Tech's lead over banks faces another test

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TECH'S LEAD OVER BANKS FACES ANOTHER TEST

There's an old Wall Street saying: "Banks are never an investment, always a trade." A look at the ratio between the S&P 500 Technology Sector Index and the S&P 500 Banks Index helps explain why.

Over the long run, tech has been the clear winner, and that remains true in 2026. The tech sector .SPLRCT is up more than 28% this year, versus a 1.7% gain for big banks .SPXBK. By comparison, the broader S&P 500 .SPX has advanced 14%, while the S&P 500 Financials sector .SPSY is up just 0.5%.

Lately, however, the relationship has been anything but steady. The Tech/Banks ratio peaked at a record 12.41 on June 1 while testing a long-term resistance line dating back to the dot-com era. The failed breakout hinted that tech's leadership was vulnerable, and the ratio quickly tumbled to a late-July low of 9.47.

Since then, tech has regained the upper hand. The ratio rebounded to 12.22 last Wednesday before easing to 11.7 by Monday’s close, ahead of a busy week of third-quarter bank earnings.

If the ratio weakens further, key support levels lie at the June 2024 high of 11.29 and the October 2025 high of 10.68. The 200-day moving average sits near 10.15, while a trend line from the 2006 low comes in just above 9.00. That line has contained tech's relative weakness versus banks for nearly eight years.

If the ratio pushes above the October 6 high, the next hurdles are the May peak and the long-term resistance line near 12.75.

A bigger development may be unfolding beneath the surface. The ratio's long-term support and resistance lines continue to converge and are on track to meet around mid-2029, potentially setting up a major inflection point. A decisive break above resistance would reinforce technology's long-term leadership, while a break below support would suggest banks are finally gaining the upper hand. Either way, the narrowing range points to the potential for a much larger trend to emerge.

(Terence Gabriel)

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